3. The Keynesian and classical views of aggregate supply Complete the following table by matching the macroeconomic assumptions about aggregate supply to the appropriate school of thought. Assumption Product prices and wages tend to be inflexible. Only an increase in aggregate demand can move an economy out of a recession and back to potential real GDP quickly. The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy that is currently in macroeconomic equilibrium at its full-employment output level. The aggregate supply curve (AS) in this diagram is consistent with the view of aggregate supply. Classical Keynesian Suppose consumers become unusually pessimistic about future economic conditions, causing consumption spending to decline. Shift the appropriate curve on the graph to illustrate the impact of the decrease in consumption.

3. The Keynesian and classical views of aggregate supply Complete the following table by matching the macroeconomic assumptions about aggregate supply to the appropriate school of thought. Assumption Product prices and wages tend to be inflexible. Only an increase in aggregate demand can move an economy out of a recession and back to potential real GDP quickly. The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy that is currently in macroeconomic equilibrium at its full-employment output level. The aggregate supply curve (AS) in this diagram is consistent with the view of aggregate supply. Classical Keynesian Suppose consumers become unusually pessimistic about future economic conditions, causing consumption spending to decline. Shift the appropriate curve on the graph to illustrate the impact of the decrease in consumption.

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter10: Bringing In The Supply Side: Unemployment And Inflation?

Section: Chapter Questions

Problem 3TY

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